IB ECONOMIC STUDY GUIDE

Day 1: Microeconomics

1. Demand and Supply

• Law of Demand: As price increases, quantity demanded decreases (ceteris paribus).
  
  

• Law of Supply: As price increases, quantity supplied increases (ceteris paribus).
  
  

• Market Equilibrium: Where the quantity demanded equals the quantity supplied at a particular price.
  
  

• Shifts vs. Movements: A shift in the curve is caused by factors like income, tastes, or prices of related goods; a movement along the curve is caused by a change in price.
  
  

Model: Supply and Demand Graph

• Practice drawing shifts in the demand curve (right for increase, left for decrease) and the supply curve.
  
  

2. Elasticity

• Price Elasticity of Demand (PED): A measure of how much quantity demanded responds to a change in price.
  
  

  • Formula: PED = % Change in Quantity Demanded / % Change in Price
    
    

• Price Elasticity of Supply (PES): A measure of how much quantity supplied responds to a change in price.
  
  

• Income Elasticity of Demand (YED): Measures the responsiveness of demand to changes in income.
  
  

  • Formula: YED = % Change in Quantity Demanded / % Change in Income
    
    

• Cross-Price Elasticity of Demand (XED): Measures the responsiveness of demand for one good to the price change of another good.
  
  

  • Formula: XED = % Change in Quantity Demanded of Good X / % Change in Price of Good Y
    
    

Model: Elastic vs. Inelastic Demand Curves

• Perfectly Inelastic Demand: Vertical demand curve (PED = 0).
  
  

• Perfectly Elastic Demand: Horizontal demand curve (PED = ∞).
  
  

• Unitary Elastic Demand: A 1:1 relationship between price and quantity.
  
  

3. Government Intervention

• Price Ceiling: A maximum price set by the government (e.g., rent controls).
  
  

• Price Floor: A minimum price set by the government (e.g., minimum wage).
  
  

• Subsidy: A payment by the government to producers to encourage the production or consumption of a good.
  
  

• Taxation: A government-imposed charge on producers or consumers.
  
  

Model: Price Controls and Tax Incidence

• Draw the effects of a price ceiling and price floor on market equilibrium.
  
  

• For taxation, practice drawing the shift of the supply curve and how the burden of tax is shared between consumers and producers.
  
  

4. Market Failure

• Externalities: Costs or benefits of a market activity that affect third parties (e.g., pollution or education).
  
  

  • Negative Externalities: External costs, like pollution.
    
    

  • Positive Externalities: External benefits, like education.
    
    

• Public Goods: Non-rivalrous and non-excludable (e.g., street lighting, national defense).
  
  

• Common Resources: Non-excludable but rivalrous (e.g., fisheries, forests).
  
  

Model: Negative Externality (Pollution)

• Practice drawing the marginal social cost (MSC) curve above the supply curve and illustrating the deadweight loss.
  
  

Day 2: Macroeconomics

1. National Income and GDP

• GDP (Gross Domestic Product): The total value of goods and services produced in an economy within a given period.
  
  

• Nominal GDP vs. Real GDP: Nominal is unadjusted for inflation, while real GDP accounts for inflation.
  
  

• GDP Deflator: A measure of the price level, used to adjust nominal GDP to real GDP.
  
  

• Circular Flow of Income: Illustrates the movement of money and goods in the economy between households and firms.
  
  

Model: AD-AS Model (Aggregate Demand-Aggregate Supply)

• Show how shifts in aggregate demand (AD) and aggregate supply (AS) can cause changes in GDP and price levels.
  
  

2. Unemployment, Inflation, Economic Growth

• Types of Unemployment: Frictional, Structural, Cyclical, and Seasonal.
  
  

• Inflation: The general increase in prices over time.
  
  

  • Demand-pull inflation: Caused by an increase in aggregate demand.
    
    

  • Cost-push inflation: Caused by an increase in production costs.
    
    

• Economic Growth: The increase in the value of goods and services produced in an economy over time, measured by GDP.
  
  

Model: Phillips Curve

• Practice drawing the short-run and long-run Phillips curve showing the inverse relationship between inflation and unemployment in the short run.
  
  

3. Fiscal and Monetary Policy

• Fiscal Policy: Government decisions about taxation and spending to influence the economy.
  
  

• Monetary Policy: Central bank actions to control the money supply and interest rates to influence the economy.
  
  

• Expansionary vs. Contractionary: Expansionary policies aim to stimulate the economy, while contractionary policies aim to slow it down.
  
  

Model: Monetary Policy and the LM Curve

• Show how an increase in money supply shifts the LM curve down, reducing interest rates and increasing investment.
  
  

Day 3: International Economics

1. Trade Theories

• Absolute Advantage: When a country can produce a good more efficiently than another.
  
  

• Comparative Advantage: When a country can produce a good at a lower opportunity cost than another.
  
  

Model: Comparative Advantage and Gains from Trade

• Draw the Production Possibilities Frontier (PPF) for two countries and show how they can benefit from trading based on comparative advantage.
  
  

2. Trade Protectionism

• Tariffs: A tax on imports to protect domestic industries.
  
  

• Quotas: A limit on the quantity of goods that can be imported.
  
  

• Subsidies: Government financial assistance to domestic producers to make their products cheaper in international markets.
  
  

Model: Impact of Tariffs on a Market

• Show the effects of tariffs on consumer prices, producer profits, and overall welfare.
  
  

3. Exchange Rates and Balance of Payments

• Floating Exchange Rates: Exchange rates determined by market forces.
  
  

• Fixed Exchange Rates: Exchange rates pegged by the government to another currency or a basket of currencies.
  
  

• Balance of Payments: A record of all economic transactions between a country and the rest of the world, including current and capital accounts.
  
  

Model: Foreign Exchange Market

• Illustrate how supply and demand in the foreign exchange market determine currency value.
  
  

Day 4: Development Economics

1. Economic Development and Growth

• Economic Growth vs. Economic Development: Growth is an increase in GDP; development is a broader measure of improvements in living standards, poverty reduction, and education.
  
  

• Human Development Index (HDI): A composite index measuring health, education, and income.
  
  

2. Poverty, Inequality, and Development Strategies

• Poverty Trap: A situation where poor countries or people remain poor because they cannot access the resources needed to improve their condition.
  
  

• Trade Liberalization: The removal of barriers to trade to allow more market access and improve growth.
  
  

3. Barriers to Development

• Debt: High levels of debt prevent developing countries from investing in growth.
  
  

• Corruption: Mismanagement of resources and investment.
  
  

Key Formulas and Diagrams to Remember

• GDP Deflator = Nominal GDP / Real GDP × 100
  
  

• Consumer Price Index (CPI)
  
  

• AD-AS Curves: Shifts in AD and AS to show economic conditions.
  
  

• Phillips Curve: Short-run vs long-run trade-off between inflation and unemployment.

Additional Tips:

• Take short breaks every 45 minutes to keep your focus sharp.
  
  

• Try teaching some concepts to someone else (or to yourself) as it helps reinforce understanding.
  
  

• Don’t overdo it; get enough rest so you’re fresh for the exam.

1. YouTube Channels for Quick Clarifications & Visuals

• IB Economics Revision: This channel offers targeted revision videos for the IB Economics syllabus, including all core topics (Micro, Macro, International, and Development Economics).
  
  

• Simply Economics: Great for concise explanations, examples, and tips for both standard and higher-level economics.
  
  

• EconplusDal: Dal's videos cover IB Economics concepts with clear, high-quality explanations and diagrams.
  
  

2. Past Papers and Mark Schemes

• IB Documents: This website has a comprehensive collection of IB Economics past papers and mark schemes. Working through these past papers will help you familiarize yourself with the format and identify frequently tested concepts.
  
  

• Revision Village: Offers a subscription-based resource for past paper questions, including detailed explanations of answers, with a specific focus on IB Economics.
  
  

• IB Questionbank: If you have access to this through your school, it's a treasure trove of past paper questions organized by topic. It's an excellent resource for focused practice.
  
  

3. Interactive Resources

• Tutor2u: They offer free resources like revision notes, summary sheets, and exam-style questions. Their interactive quizzes and revision flashcards are great for reinforcing knowledge.
  
  

• Economics Help: This site provides clear explanations of many concepts, as well as practical examples and application of theory to real-world events.
  
  

4. Study Guides & Summaries

• Oxford IB Economics Study Guide: A great resource for concise, clear, and well-organized revision. This covers all essential topics and includes practice questions for each section.
  
  

• IB Economics: Study and Revision Guide by StudySmart: Another study guide that provides summaries, key terms, and exam strategies.
  
  

5. Apps and Tools for Studying

• Quizlet: Create flashcards for important definitions, diagrams, and terms. You can search for pre-made IB Economics sets if you don't want to make them yourself.
  
  

• Anki: A flashcard app that uses spaced repetition, ideal for drilling key terms and concepts for quick recall.
  
  

• Khan Academy: Although not IB-specific, Khan Academy’s economics section is helpful for understanding foundational concepts that you can apply to the IB syllabus.
  
  

6. Sample Problems & Practice

• IB Econ Past Paper Question Bank (if available from your school or online): Do timed practice questions for both multiple choice and essay-style questions.
  
  

• IBecon: Provides IB Economics practice questions, especially for exam-style writing prompts. It’s a great way to test your understanding and improve writing efficiency.
  
  

7. Revision Notes & Diagrams

• IB Economics Revision Notes by Mr. H (available on various websites like IB Revision Notes): These notes are typically succinct and cover all topics, with diagrams and key points.
  
  

• IB Econ Diagrams: Make sure to practice drawing key diagrams (e.g., supply and demand curves, AS-AD curves, Lorenz curve, production possibilities curve, etc.) as they are an essential part of the exam.
  
  

8. IB-Specific Study Forums & Communities

• Reddit’s IB Economics Community: Engage with other students on Reddit’s IB Economics subreddit, where you can ask questions, share tips, and discuss key topics.
  
  

• IB Survival: An online community for IB students, where you can find resources, past papers, and discussion on exam strategies.